Strategy's Bitcoin Moat Narrows as Income ETFs, Treasury Rivals Circle

Strategy's sale of 3,588 bitcoin on 6 Jul to fund preferred dividends, its largest disposal since dropping a "never sell" stance in late May. To address investor concerns, Strategy announced a Digital Credit Capital Framework on 29 Jun to strengthen preferred-dividend liquidity, improve confidence and add capital-allocation tools.

Why STRC has come under pressure

The move followed rising scrutiny of STRC, the perpetual preferred instrument Strategy listed in July 2025. It carries a $10.4bn notional value, a $100 par value and a newly increased 12% dividend, up from 11.5%. The framework's stated objective is for STRC "to trade over time in a range of approximately $99 to $100."

It has not been close. STRC fell as low as $71.25 intraday on 22 Jun, as both Bitcoin and Strategy's common stock tumbled. As of 6 Jul, MSTR was down 20.7% over the past month and 35.8% year to date.

Worries stem from Strategy using STRC proceeds to issue and sell shares, letting it keep accumulating bitcoin through the asset's lacklustre year. The instrument's weakness is denting that ability, and the ballooning dividend obligations are draining cash reserves and shortening the runway to cover them. As of 29 Jun, annualized dividend obligations stood at approximately $1.76bn.

In research published on 23 Jun, CryptoQuant head of research Julio Moreno wrote that the firm's May repurchase of $1.5bn of its 0% Convertible Senior Notes due 2029 cut the buffer supporting the STRC dividend, and that "the rapid growth of dividend obligations has become a structural liability that could weigh on STRC's perceived sustainability."

STRC matters to Strategy: it helped grow the balance sheet by $2.1bn in the first quarter of 2026, per the company's earnings presentation. Strategy also moved to semi-monthly dividend payouts, from monthly, on 30 Jun after a shareholder vote, to "stabilize price, dampen cyclicality, drive liquidity," it said. The framework lifted STRC, but it was still below par as of 6 Jul.

Market's cautious first read

Nic Puckrin, founder of research outfit Coin Bureau, told Sandmark the market first reacted positively because the plan allayed some fears of Strategy mass dumping "It's positive to the extent that they're trying to fix the issue with Strategy, and [co-founder Michael] Saylor is not just staring off a cliff. So, it's a responsible take from him," he said.

Matt Hougan, chief investment officer at asset manager Bitwise, reads the episode as healthy end-of-cycle clearing rather than a crisis, writing on 2 Jul that the market is "nearing the bottom." He argues Strategy's role has changed, its years as "the most dominant bitcoin buyer in the world and a one-way source of bitcoin demand" now "likely over," but expects it to sell no more than a few billion dollars of bitcoin a year and to turn net buyer again if bitcoin rallies. On the preferred itself, he thinks it "unlikely that STRC will trade back to $100 until we see bitcoin's price move significantly higher."

Bitcoin fell to a session low near $61,400 at 13:30UTC on 6 Jul after the disclosure, down from about $62,400 beforehand and an early-session peak near $63,900, leaving it roughly 51% below its 6 Oct all-time high of $126,198.

Rebuilding the reserve, pausing buys

Strategy also paused its weekly bitcoin buying in the week of 22-29 Jun, its first pause since May, in line with Moreno's call to "pause Bitcoin purchases and rebuild the cash reserve." Moreno added that "buying at cycle tops and accumulating during bear markets has resulted in rapid unrealized loss growth and deteriorating STRC fundamentals."

Another plank of the framework is a rebuilt cash reserve, raised to $2.55bn from $1.4bn the prior week, per an 8-K filing. The reserve "may be used only to support the payment of dividends on Strategy's preferred stock and interest on outstanding indebtedness." The company says this extends dividend and interest coverage to 17.4 months; at the start of the year, coverage stood at seven years, according to CryptoQuant.

Rajiv Sawhney, head of international portfolio management at asset manager Wave Digital Assets, told Sandmark the biggest overhang was the dividend cash-flow constraint and common-stock weakness, and that freedom to sell bitcoin should let Strategy manage dividends without leaning on at-the-market (ATM) share sales. "Over time, both the common stock and preferreds will recover," he said.

The framework lets Strategy sell up to an initial $1.25bn of bitcoin to build that reserve, with separate uncapped authority to sell for dividends, interest and buybacks. It is a reversal of the "never sell" mantra Strategy began softening last month. On 1 Jun, it said it had sold 32 bitcoin, its first sale since 2022. Though insignificant for a firm holding 843,775 bitcoin, it dampened sentiment, with some arguing it heralded larger disposals.

Growing menu of bitcoin exposure

The medium-term threat is structural: bitcoin-yielding ETFs could take a slice of the institutional pie. BlackRock, which runs the largest bitcoin ETF, the $44.9bn iShares Bitcoin Trust (IBIT), seeded its iShares Bitcoin Premium Income ETF (BITA) on Nasdaq on 9 Jun; it began trading on 16 Jun. The fund holds bitcoin and IBIT shares, tracks bitcoin and generates income through "an actively managed strategy of writing (selling) call options on IBIT shares,"  per its Securities and Exchange Commission (SEC) filing.

Puckrin argued these funds sharpen a Strategy problem: its offering is becoming less distinctive. When Strategy first adopted the approach, listed bitcoin exposure was scarce; spot bitcoin ETFs arrived in January 2024, and that was competition, he said. Income ETFs add a dimension: spot exposure plus a yield in a regulated wrapper, and they are typically less volatile than direct exposure because they sell covered calls. Strategy, by contrast, is a higher-beta, leveraged play. "It's simply one option in a growing menu," he said.

It is not only BlackRock. Goldman Sachs said in April it would introduce a Bitcoin Premium Income ETF, which will invest "at least 80% of its net assets" in bitcoin ETPs, options on spot bitcoin and options on bitcoin ETP indices, per the SEC filing.

Others argue that ETFs and Strategy serve different objectives. Sawhney echoed Puckrin that the funds chase lower-volatility, yield-seeking investors, while Strategy is a synthetic, higher-beta proxy that will always over or under-perform bitcoin on both sides. "The underperformance in recent weeks was because of the preferred-dividend overhang, but now they have a looser treasury policy to account for this, which should help MSTR recover," he said.

What's next?

Investors and analysts broadly like the response, though another sale could dampen sentiment. Mark Palmer, equity research analyst at Benchmark, reiterated a Buy rating and a $570 price target on Strategy, more than four times its $101 level on 6 Jul. "Strategy is now an active manager of both sides of its capital structure, an approach that we view as a significant positive for its shareholders," Palmer told Sandmark.

Newcomers could sharpen the shift. Sandmark has reported that the Adam Back-led BSTR delayed its Cantor Equity Partners SPAC merger to 10 Jul. Asked whether it aims to challenge Strategy, chief investment officer Sean Bill told Sandmark it would be complementary. "They own the credit market space; we aim to be number two, right behind them, while building a different niche: active management of bitcoin," Bill said, expecting one or two eventual winners, as in other tech-driven sectors.